Publicly traded companies would have to disclose the greenhouse gas emissions from their operations and supply chains and also report progress being made toward achieving reductions, under a proposal released Monday by the Securities and Exchange Commission.
The proposal could have far-reaching impacts on food and ag companies, as it would require disclosure of “any climate-related risks reasonably likely to have a material impact on the registrant’s business or consolidated financial statements,” according to the Federal Register document released by the SEC.
The proposal, for example, requires disclosure “if a material risk concerns the location of assets in regions of high or extremely high water stress.” SEC registrants would have to disclose, for example, the amount of assets and the percentage they comprise of total assets. (A “registrant” includes a publicly traded company registered with the SEC.)
The proposal would require companies to disclose information on direct GHG emissions (known as Scope 1), indirect emissions from purchased electricity or other forms of energy (Scope 2), and emissions from upstream and downstream activities in its value chain (Scope 3), “if material or if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions,” the commission said in a news release.
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"I am pleased to support today’s proposal because, if adopted, it would provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers," said SEC Chairman Gary Gensler.
The commission approved the proposal by a 3-1 vote at Monday's meeting. The public comment period will kick off officially when it is published in the Federal Register.
In a fact sheet, the SEC said companies also would have to disclose their “governance of climate-related risks and relevant risk management processes,” as well as any transition plans.
“The proposed disclosures are similar to those that many companies already provide based on broadly accepted disclosure frameworks, such as the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol,” the SEC said.
The commission asked for comments on a series of questions, including how to define “high water stressed region.”
Referring to the World Resources Institute’s definitions, the SEC asks, “Should we similarly define an ‘extremely high water stressed area’ as a region where more than 80 percent of the water available to agricultural, domestic, and industrial users is withdrawn annually?”
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